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Wednesday, January 30, 2013

Global Unemployment Is Far Worse Than You’ve Been Told

The International Labour Organization (ILO) just released its estimate for global unemployment. It claims there will be more than 200 million unemployed people worldwide this year. Using what it calls the “labor force participation rate,” the ILO calculates that approximately 64% of working age people are working or looking for work.

The problem is that the labor force participation rate includes, in developing countries, subsistence-level activities such as trading a chicken for some coal, selling fruit in traffic on busy roadways, and even begging. This definition of “work” is just too broad.

Let me explain: There are 7 billion people on Earth and 5 billion of them are adults aged 15 and older. So the ILO calculates that 64% of 5 billion -- or 3.2 billion of these adults -- are working or want to work. That is almost exactly what the Gallup World Poll found. When we asked a sample of the 5 billion adults in the world if they wished for a “good job,” almost exactly 60%, or 3 billion, told us yes.

So the ILO and Gallup agree -- up to a point. Where we diverge is our definition of “work.” Gallup does not count work that is “informal” or “self-employed” or “part time” -- selling fruit in traffic, etc. -- because it makes the data very messy. There is also a huge variation of informal jobs between developing countries and more developed ones, so the comparison becomes apples to oranges.

Gallup has a rigorous and precise definition of a good job: one that is at least 30 hours per week for an employer. By that definition, 60% of 5 billion adults, or 3 billion people, desire a good job -- and of that 3 billion, 27% report actually having a good job.

So Gallup’s World Poll data come to a very different conclusion from the ILO: We see that 2.2 billion -- or 73% of the 3 billion people who want a good job -- are actually out of work, versus the ILO’s estimate of 200 million without jobs as reported by the ILO.

Put another way, the ILO reports global unemployment at 5.9%, whereas Gallup reports global unemployment of good jobs at 73%.

While wildly different, they are both accurate figures for what they claim to report. But I question the value of a single statistic that reports world unemployment at 5.9%. At best, this figure grossly understates the world’s most serious problem, which is a massive shortfall of good jobs.

Now, we at Gallup are quick to realize that we are measuring different things, and we have great respect for ILO’s statistics. But I would strongly encourage all economists, governments, and nongovernmental organizations committed to human development to factor in Gallup World Poll unemployment, or Payroll to Population rate, in their assessments of global joblessness.

I say this because the single biggest cause of a nation’s instability is hopelessness that is rooted in unemployment and underemployment. In my view, the most salient statistic in predicting a country’s social and political stability is what percentage of a nation’s adult age population is engaged in a real full-time job -- in a good job. For instance, the U.S.’ good job rate (Payroll to Population) is at 41%, the same as Canada’s. Spain’s and Poland’s rates are both 33%, while Iran’s and Mali’s are an alarmingly low 9%. As goes this single metric, so goes the very existence of a country’s future.


Anonymous said...
February 3, 2013 at 6:39 PM  

Finally, a dose of reality!

The Middle East, Southern Europe, and the North African economies are a disaster and getting worse. I don't think anyone has a good handle on true global unemployment and I would say that youth unemployment rivals levels not seen since the great depression in many regions of the world.

February 14, 2013 at 1:02 PM  

This is the kind of responsibility and ethics around the data analysts. Is easy to make up the data when no one else who really understand the basis or when a powerful economist is looking for benefits based on speculation and the perception of his reality.

Anonymous said...
February 14, 2013 at 2:02 PM  

Gallup does not count work that is “informal” or “self-employed”

So that means all business owners, farmers, and independent contractors are unemployed? Seeing that this accounts for a huge percentage of the world population that seems to misrepresent just as bad or worse in the other direction

Evelina Mannarino said...
February 14, 2013 at 4:37 PM  

I have also noticed the difference. A lot of my family in Italy and Poland are not working. Here is Canada, my staff are working less hours and overall going out with the same friends and family, our activity levels and spending has gone down as well. Either way, there are still lots of opportunities, we just have to make our own.
Evelina Mannarino, Author of Profits In Real Estate Rentals

Anonymous said...
February 14, 2013 at 5:54 PM  

Great information!

The Wonderer said...
February 15, 2013 at 2:02 AM  

I disagree with a key element of your "good job": my wife has a 'very good job' at 25 hours per week, by choice, while we bring up our children. There are many people in that situation.

The salary she earns is more than MANY people earn working more than 30 hours.

It is therefore inaccurate to say she does not have a "good job" in terms of what you are trying to assess.

Similarly, there are many people working very long hours for what amounts to slave labour. I do not think they would consider their job as "good".

Some sort of index of "formal employment earning a reasonable wage" may end up giving a more accurate assessment?

Anonymous said...
February 15, 2013 at 11:43 AM  

Thanks for sharing a more detailed view of the reality of the under/unemployed in the U.S. Many who sailed through the recession untouched have no idea of the true reality of the meltdown of opportunity or should I say, lack of opportunity now in our country for many. Your post sheds light on the severity of the issue. We all need to address and be concerned about for future generations. Hope will come in entrepreneurship and education.

Anonymous said...
February 21, 2014 at 10:43 AM  

Could this be the result of a "laborless" economy that relies on complex financial manuvering to earn money for those at the high end rather than investment in actual good and services. When we have a laborless economic reality where all the wealth is siphoned to the top, and technology is replacing so many jobs, and few jobs pay a living wage...what are people to do? Education is not the solution. Even education is moving to the overpaid CEO model where the workers (think adjunct professors) are paid little to nothing, while administrators rake it in. We need to change the equation by instituting laws that rein in robber barons before they sink us all. Simple things like stock transaction taxes could go a long way towards a solution. Our goal should be to create balance.

We also need to have a serious conversation on what does life with no work look like? If this is our future, shouldn't we be talking about what we can do with our lives that will help us to be fulfilled human beings who can survive without working?

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